‘Commodity finance has nothing to do with market prices’

Commodity financiers always see a case for requirement of finance, irrespective of what happens to the price of the underlying commodity.

“I’ve nothing to do with commodity prices. I neither lose or benefit with the up and down cycles nor take any position in commodities,” says Sudip Bandyopadhyay, Chairman, Inditrade Group.

With gradual professionalisation of the warehouse network, the need for financing will exponentially grow. Inditrade works in collaboration with such professional warehouse service providers.

“We provide finance against a stock of a particular commodity subject to certain terms and conditions,” Bandyopadhyay told BusinessLine . Commodities are quite unlike any other security.

He cited the case of turmeric as an example. There’s a particular season of the year when the entire turmeric production comes into the market.

Time for market

In fact, every commodity has a time when it comes to the market. But somebody has to buy it. If somebody has to buy it, it opens the scope for financing.

This has been happening over the past hundreds of years. As the turmeric crop becomes available in the market in the month of August, a trader buys and keeps it. “He sells it to you and me to consume in December, January or March. That’s how the business operates. So a commodity comes in only at a point in time, somebody has to buy it and store it so that rest of us can consume throughout the year.”

There are two types of financing in agriculture — pre-harvest financing and post-harvest financing. Banks have been focused completely on pre-harvest financing.

These loans are given to farmers for feed or fertilisers. But Inditrade operates only in post-harvest finance. It and other organised players disburse around ₹10,000 crore an year.

Inditrade does not normally go beyond ₹5 crore to a single party in a single transaction. It has put internal limits commodity-wise, though they keep changing with season and the crop.

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